Bloomberg Study Finds Automated Equity Trading Results in Improved Performance

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Mar 13, 2024, 05:00 ET

NEW YORK, March 13, 2024 /PRNewswire/ -- Bloomberg today announced the results of a study that analyzed performance and execution costs from trades automated using Rule Builder (RBLD), Bloomberg's multi-asset automated trading solution. The research, which examined data from Bloomberg's Transaction Cost Analysis (BTCA) solution, found that both U.S. and European equity trading desks that used RBLD saw an overall performance (combination of automated and manual orders) increase of 30% and 36% respectively, compared to Non-RBLD firms trading manually.

The study evaluated anonymized data from BTCA covering 23 million orders between January 1, 2022, and December 31, 2023. Specifically, the data analyzed included the arrival price or Implementation Shortfall benchmark, normalized by the weighted average based on each trade's notional value in USD. Implementation Shortfall refers to the difference between the decision price and the final execution price of a trade.

Analysis of U.S equity trades showed that orders that used RBLD outperformed manual orders by 38%. In European equity markets, orders using RBLD showed a 68% performance improvement compared to manual orders. The use of RBLD also resulted in less performance variation, which provides traders with more consistent and predictable results.

The study also found that RBLD can help better predict and manage trade costs. Analyzing orders based on their size compared to the average daily volume (ADV) showed that orders using RBLD consistently performed better than manually routed orders in both U.S. and European equity markets across a range of order sizes. In the US, automated orders using RBLD outperformed manual orders by 25% (0-0.5% ADV), 35% (0.5-1% ADV), and 47% (1.0-2.0% ADV). Similarly, in Europe, the trend showed outperformance by 51% (0-0.5% ADV), 39% (0.5-1% ADV), and 84% (1.0-2.0% ADV).

"Automating equities trading has been an important part of our strategy as we continue to see benefits from utilizing a tool like Rule Builder to achieve the results our clients have come to expect from us," said Nicolas Weber, Head of CMS Execution as CA Indosuez Wealth Europe. "Markets continue to move faster, and Bloomberg's automated trading solution provides us with workflows we need to remain competitive while serving our clients."

"Automated trading is playing a vital role in augmenting the trading process, and these results make it clear clients are realizing a broader set of benefits beyond increasing their productivity, including improving execution performance," said Ravi Sawhney, Global Head of Trading Automation and Analytics at Bloomberg. "The integration between Rule Builder and BTCA provides clients with a seamless workflow that enhances the entire automated trading process, from creating automation rules directly on the Bloomberg Terminal to then analyzing their impact on trading costs and providing ideas for further optimizations."

RBLD is a multi-asset automated trading solution that offers buy-side execution traders a way to deploy and realize the benefits automation can deliver, including increased speed and accuracy in trading and allowing more time to dedicate to clients and complex workflows.

Bloomberg BTCA delivers robust transaction cost analysis, offering impactful trading insights into implicit trading costs that help clients define, monitor, and improve their best execution strategies. Furthermore, using BTCA's powerful exception-based workflows, traders can help ensure they meet a firm's compliance and execution policies.

A full copy of the report can be found here.

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SOURCE Bloomberg